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1 THE STRATEGIC MANAGEMENT OF INTERNATIONAL ENTREPRENEURIAL ACTIVITIES AT AUSTRALIAN UNIVERSITIES By David Alan Poole A thesis submitted for the Degree of Doctor of Philosophy University of Technology, Sydney October, 2000

2 CERTIFICATE OF AUTHORSHIP/ORIGINALITY I certify that the work in this thesis has not previously been submitted for a degree nor has it been submitted as part of requirements for a degree except as fully acknowledged within the text. I also certify that the thesis has been written by me. Any help that I have received in my research work and the preparation of the thesis itself has been acknowledged. In addition, I certify that all information sources and literature used are indicated in the thesis. Signature of candidate i

3 ACKNOWLEDGEMENTS I would like to begin by thanking my supervisor, Associate Professor Graham Pratt. Graham s approach to this daunting task (and to his demanding student!) has been appreciated. His deep interest in universities, strategic management and international business coincided with my own. I owe a lot to him. My assistant supervisor, Professor Mark Lyons, was also of considerable assistance. His insightful comments were gratefully received at critical stages of this process. I would also like to thank the UTS academic and administrative staff for their support. The valuable suggestions of people like Professor Stewart Clegg, Associate Professor Jenny Onyx and Dr Thekla Rura-Polley added greatly to my work, and I have very much appreciated the administrative and financial assistance provided by the staff of the UTS School of Management, Faculty of Business, and University Graduate School. Professor Rob Lynch was particularly helpful in this regard. Several writers and commentators in the field have also been of real assistance. Directly and indirectly, the advice and insights of Chad Perry, Romuald Rudzki, Simon Marginson, and Hans de Wit have been particularly helpful. My colleagues at UWS have also been particularly supportive. In particular, Glenn Pearce and Catherine Sutton-Brady have been great friends and especially tolerant of the highs and lows which are part and parcel of doing a PhD. I am thankful too to UWS for granting me a sabbatical during the second half of 1999, enabling me to complete much of this study while free of teaching commitments. ii

4 Friends from church and elsewhere like Stuart Coulton, Mark and Kathryn Adams, Andrew Adams, Ben and Kylie Meikle, Steve Coxhead, the Harrisons and the Andersons have also given great support. Thanks! Colleagues at Blacktown City Council have also been tolerant of my absences in recent times, so I am thankful to them for their forbearance. I owe a debt of gratitude to the participants in this study. In this age of competitiveness and secretiveness, the willingness of these institutions to participate and assist in this research was superb. I hope I have done justice to their contribution in my reporting. In particular, I would like to thank Emeritus Professor Di Yerbury AM, Associate Professor Mark Farrell, Professor Terry Heazlewood, Paul Melloy, Richard Nowak, Associate Professor Jeanette Hacket and Tony Pollock for their contributions to the study. Finally, I could never have completed this study without the support of my family. To my wife Wendy, your support and commitment were beyond the call. My mum, Jean Poole, and Wendy s parents, Warren and Elaine Charlton have also been fantastic. And to my kids, Bethany, Samuel, and Chloe, you are about to see a bit more of your dad! iii

11 6.11 Theoretical Synthesis International Education Management Literature Strategic Management Literature University and Public Sector Entrepreneurialism Literature International Business Literature Conclusion 362 Chapter 7 Conclusions 7.1 Introduction Conclusions for each Research Question Research Question Research Question Research Question Research Question Research Question Research Question Conclusion to the Research Problem Implications for Theory Implications for Policy and Practice Limitations Implications for Further Research 389 Appendix A 392 Bibliography 405 x

12 Title TABLES AND FIGURES Page Figure 2.1 Organisation of the Literature Review 23 Figure 2.2 Elements in the Development of international 28 Strategy in Universities Figure 2.3 Institutionalisation of Approaches to University 29 Internationalisation Figure 2.4 The Internationalisation Cube 32 Figure 2.5 The Reactive Model of Internationalisation 36 Figure 2.6 The Proactive Model of Internationalisation 37 Figure 2.7 The Fractal Process Model of Internationalisation 39 Figure 2.8 The Internationalisation Cycle 41 Table 2.1 Suggested Characteristics for an Effective 43 Internationalisation Process Figure 2.9 The Five Tasks of Strategic Management 61 Figure 2.10 Strategy Implementation Components 62 Figure 2.11 Integrative Organisational Life Cycle Model 66 Figure 2.12 The Building Blocks for Competing on the Edge 68 Figure 2.13 The Internationalisation Process Model 97 Figure 2.14 Market Entry Model of International Operations 100 Figure 2.15 Illustrative Market Selection Grid 101 Table 2.2 Questions to be Considered When Universities 112 Form Strategic Alliances Table 3.1 International Students in Australian Universities, Table 3.2 International and Non-International Students by 118 Broad Field of Study, 1998 Table 3.3 International and Non-International Students by 118 Type of Course, 1998 Table 3.4 Ranking of Australian Universities by Number of 120 xi

15 ABSTRACT Universities around the world are increasingly focusing on entrepreneurial activities. In Australia, the growth of international entrepreneurial activities has resulted in the creation of a billion-dollar export-oriented sector. These activities include the recruitment of international students to Australian campuses, the development of Australian university campuses in offshore locations, and the delivery of Australian degree programs at both onshore and offshore locations in partnership with universities, professional associations and private corporations. Australian universities currently receive on average around seven percent of revenues from these sources, with some depending on international entrepreneurialism for as much as one-third of revenues. Managing these activities in an efficient, effective and sustainable manner has thus become critically important to virtually every institution in the Australian higher education sector. Long dependent on government funding, Australian universities have found the rise of international entrepreneurialism a significant shift. As is the case when businesses become international, universities are faced with the need to manage the complexities, risks and challenges associated with international operations. To date, little empirical work has been undertaken which explores and examines how Australian universities are managing their international entrepreneurial business operations. The aim of this study is thus to respond to this research gap by exploring how Australian universities, particularly in terms of their Faculties of Business, organise and manage international entrepreneurial activities. The research examines management approaches, practices and processes at five Australian universities. Two are highly international, metropolitan universities recognised around the world as leaders in international entrepreneurialism. Two are smaller, regional institutions, while the fifth university is a medium- xiv

16 sized metropolitan institution which had in recent times moved aggressively to develop its international activities. Document analysis, observation and interviews with senior institutional managers, academic managers and academics at each university revealed several common themes arising in institutional approaches. These included an emphasis on diversified, offshore growth; a degree of movement towards structural centralisation, particularly in the highly international universities which had been historically highly decentralised; the presence of generally supportive organisational cultures; a perception among academic managers and academics that most international activities remain driven by financial imperatives; the perceived potential for detrimental impacts on academic research arising from increased involvement in international activities; the existence of a common concern among senior institutional managers for the effects of Faculty of Business dominance of international programs in their institutions; a tendency for most organisational learning to be informal, except in the highly international institutions; and a preference for decentralised strategic leadership which included a degree of oversight by internationally experienced senior institutional managers. A Strategic Advantage Model of Internationalisation is presented representing a theoretical and conceptual synthesis of the findings. Building on previous work undertaken in the field, the model focuses on the need for institutions to achieve best practice and competitive advantage through the leveraging of organisational and strategic competencies, the pursuit of executional advantages, the implementation of strategically decentralised leadership and the development of international business competencies. xv

17 CHAPTER 1 INTRODUCTION 1.1 BACKGROUND TO THE RESEARCH This study is about exploring and understanding how Australian universities manage their international entrepreneurial activities, such as international student recruitment and the provision of offshore and distance programs. It is also about understanding how these institutions have pursued innovative ideas and managed their interface with a complex and dynamic environment. The pursuit of international entrepreneurial activities has become a significant source of revenue for Australian universities. Over $627 million in overseas student fee revenues flowed into university coffers during 1997, with 14 universities receiving over seven percent of their total institutional revenues from this source (DETYA, 1998a). By 2000, this figure had risen to $770 million (Maslen, 2000a, p.10) Higher education has become one of Australia s biggest and most important service exports, and the nation s universities have successfully exploited the boom in demand for their services. However, some international student markets are entering periods of maturity and saturation (Evans & Kemp, 1997, p.4), and competition is intensifying (Hamilton, 1998, p.13; West Committee, 1998, p.62). Universities are responding by adopting new business approaches, with new modes and methods of delivery being implemented and business structures such as alliances becoming increasingly popular (Logan, 1996, p.7; Booth, 1997, p.1). Some commentators, such as Pokarier and Ridings (1998, pp.11-12), argue that the successes achieved to date may be due more to good luck than good management. Further, they argue that the ability of university managers to respond appropriately to this more complex and competitive environment may be constrained by the 1

18 existence of inadequate management competencies and also by the absence of any real commitment to appropriate strategic management processes. This need is further emphasised by the recognition of some institutional leaders that competition between universities for international students is increasingly not the jackpot many hoped it would be, with institutional strategies additionally being hampered by poor business practices (Carey, 1999, p.7). Universities around the world are increasingly focusing on entrepreneurial activities (Clark, 1998), however the emphasis on international entrepreneurial programs is especially high in Australia and the United Kingdom (Knight & de Wit, in de Wit, 1995; de Wit, H., 1998, pers.comm., 23 Oct.). For Australian universities, the revenue derived from these programs has filled much of the funding gap left by reductions in governmental revenue per student since the early 1980s. The government s share of university funding fell from 91 to 60 percent over the decade from 1983 (Marginson, 1997, p.246), and the federal government cut operational grants to universities by 5 percent (in real terms) or some $623.6 million during the triennium (Garcia, 1996, p.9). This change to the mix between public and private sources of funding will continue until at least 2001, as government forward funding estimates reduce direct federal grants to universities to less than $4 billion for the first time since 1990 (Kemp, 1997, pp.12-13; Healy, 1998a, p.32). University budgets have been further stretched by a 50 percent increase in student numbers over the decade from 1988 (West Committee, 1997, p.95) and by the refusal of the federal government to pay university salary increases over a minimum safety net from 1996 until the present (Coaldrake & Stedman, 1998, p.22). 2

19 At the same time, universities have faced rising levels of competition, both internal to the sector and from overseas institutions using non-traditional modes of delivery, taking advantage of the rise of greater international student mobility (Marginson, 1997, p.250; West, 1997, p.1). In sum, the evolution of a more competitive, internationally-oriented, financially-constrained environment for Australian universities has demanded that external revenues are attracted and funding sources diversified. Perhaps more than any other country except the United Kingdom, Australia has moved to exploit the international demand for educational services through the pursuit of a variety of strategies for program delivery (Bennell & Pearce, unpub., p.30). The risks and potential costs associated with these strategies rise with the degree of dependence of institutions on the revenues which flow from them, and this is making critical the need for effective strategic management of these activities. An exploration of these processes as they currently occur in Australian universities can potentially offer some insights into the process, and an overview of best practices may make the management of these activities more effective. The higher education internationalisation literature as it relates to this area is still relatively sparse. As de Wit and Callan note, the present state of the field could be well likened to an academic specialism in the preparadigmatic phase of its evolution (in de Wit, 1995, p.93). Nonetheless, some important work has been undertaken by several authors. Davies (1995) developed a two-dimensional model which analysed university approaches to internationalisation on the basis of the degree of systematic structuring of international activities, and the level of importance placed on such activities by institutional leaders. The model was extended by van Dijk and Meijer (1997) with the addition of a third dimension measuring the type of support given to international activities in universities. 3

20 A doctoral thesis undertaken by Rudzki (1998) further added to the field, with the development of several possible strategic management models of university internationalisation. Designated as the reactive, proactive and fractal models, the value of the models is in the evolution of a contextual, flexible framework which incorporates institutional differences and which offers various strategic choices which may be pursued following the monitoring and evaluation of existing activities. In addition, its emphasis on the need for appropriate review and strategic change mechanisms is useful. Rudzki s thesis focuses particularly on the management of international activities in Faculties of Business, and this study will do likewise, since business courses are the most popular choice of international students in Australian universities (DETYA, 1998b). In addition, academics, administrators and managers in Faculties of Business should, by definition, have an awareness of contemporary management practices and processes, and to have implemented these where appropriate. One aim of this study will be to explore if this is so. Another thesis (Knight, 1994) provides a suggested model for the internationalisation cycle in universities, with the cycle proceeding through phases of awareness, commitment, planning, operationalisation, review and reinforcement. The value of the model is in its emphasis on the need for a supportive culture for international activities underlying each phase, in its flexibility in allowing for recycling between the phases of the model, and in its identification of key management tasks associated with the management and organisation of international activities. A thesis by Manning (1998) usefully added to Knight s internationalisation cycle with the addition of organisational structure as a key element in the model. Several business models of strategic management also offer concepts which usefully inform this study. The internationalisation process model (Ellis & 4

21 Williams, 1995, p.54) is one such framework, and its associated market entry model of international operations suggests the need for institutions to consider issues such as appropriate market screening and selection mechanisms, proper consideration of entry mode issues and the implementation of corrective adjustment mechanisms, all of which are relevant for the university international entrepreneurial context. Similarly, conceptual frameworks for the evaluation of potential and existing international business alliances are also of potential relevance to this study (see, for example, Bartlett & Ghoshal, 1992; Hamel, Doz & Prahalad, in Bartlett & Ghoshal, 1992). The strategic management frameworks of Thompson and Strickland (1998) provide useful diagnostic tools in developing an understanding of university international strategies and the management processes which guide them. In particular, their five-task strategic management model provides a sound starting point for the development of a general understanding of strategy processes, while models which answer the question of what to look for in understanding an organisation s strategy and the way in which it is implemented are also of potential relevance in informing this research. Together with Knight s (1994) international education model, the strategic management frameworks provided by Thompson and Strickland (1998) stand at the conceptual core of this study. Additional concepts of relevance derive from the public sector and higher education entrepreneurial literature (see, for example, Wanna, Forster and Graham, 1996; Slaugher & Leslie, 1997; Clarke, 1998) and from the seminal work on strategy by Mintzberg (1984, 1985, 1994). These will be discussed in Chapter 2 of the thesis. 5

22 1.2 RESEARCH PROBLEM AND QUESTIONS The primary aim of the research is to explore how Australian universities strategically manage their international entrepreneurial activities, with particular reference to the activities of Faculties of Business. In other words, the research seeks to answer the fundamental question how do they do it?. In responding to this question, the study aims to describe, analyse and reflect on university management practices and processes in the context of an increasingly complex environment and competitive industry. In sum, the research problem is as follows: Research Problem With particular reference to Faculties of Business, how do Australian universities manage their international entrepreneurial activities? Research Questions The research questions flowing from the research problem are as follows: 1. What international entrepreneurial activities do Australian universities and their Faculties of Business undertake? 2. Why have they chosen particular activities and modes of operation? What is the rationale behind market and mode selection? 3. How are these activities managed and organised? Why were these management processes implemented? 6

23 How have they evolved? 4. How are these processes perceived by senior institutional managers, academic managers and Faculty of Business academics? What implications for the future practice of international entrepreneurialism arise from these perceptions? What are the perceived impacts of these activities? In particular, what consequences arise from the dominance of business faculties in these activities? 5. What are the perceived institutional critical success factors (CSF s) required for the effective management of international entrepreneurial activities, and are these CSFs a potential source of ongoing competitive advantage? Can comparisons be drawn between perceived CSFs in this sphere and those discussed in the higher education or international business literature? How significant are potential CSFs such as leadership and organisational learning for institutional effectiveness in this domain? 6. To what extent do existing models derived from the fields of international education management (eg. Knight, 1994) and strategic management (eg. Thompson & Strickland, 1998) adequately describe the strategic management practices of universities in the international entrepreneurial domain? Are new models demanded by the changing nature of this sector, its institutions and markets? 7

24 1.3 JUSTIFICATION FOR THE RESEARCH One justification for the research derives from the potential significance of the findings. The major significance of the study is in its potential contribution to the practice of strategic management in higher education. It will shed light on the how is it done? dimension of university management as it applies to this sphere and, where it appears to be done well, explore how and why this occurs. In addition, the issue of whether the members of these organisations appear to learn from their experiences, in both positive and negative ways, will be explored and discussed. A second justification for the research comes from the absence of research in this sphere. In relation to the study of internationalisation in higher education, empirical research in the field is viewed as being ethnocentric and limited in a number of other ways: The study of internationalisation of higher education is still rather fragmented, primarily based on American experiences, and conflated with studies in the areas of comparative education, international education, global education, and multicultural education. For Europe, the situation is described clearly by Teichler: Most of the research available on academic mobility and international education seems to be occasional, coincidental, sporadic or episodic. The same can be said for Canada, Australia, and even for the USA. (Knight & de Wit, in de Wit, 1995, p.29) The assertion in relation to Australia appears to continue to be true. A review of the literature reveals that there is little real empirical knowledge about the processes of management of international entrepreneurial activities. One study concluded that Australia s university system possessed considerable strength in its management of internationalisation: 8

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